The Morning Ledger: Health-Care Rollout Hits New Hurdle

The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Send us tips, suggestions and complaints: david.hall@wsj.com. Get The Morning Ledger emailed to you each weekday morning by clicking here. Follow us on Twitter @CFOJournal.

The administration said that businesses still will have time to sign up for policies before they go into effect Jan. 1. But the delay nevertheless is a significant concession by the administration, which so far has said it would meet its deadlines. A bigger worry is the readiness of the individual exchanges, where seven million people are expected to gain coverage through 2014. The administration says it’s confident they’ll open on time. But people close to the situation tell the Journal they’re skeptical.

The long-term impact of the tech problems isn’t clear. People will be able to enroll in the individual and small-business exchanges in time for policies to go into effect Jan. 1 when the law’s major provisions take effect, administration officials say. Even if the individual exchanges don’t initially work as promised, people could enroll through brokers or by using paper applications. “These technical glitches happen every time there is an implementation of a large-scale benefit,” said Dan Mendelson, chief executive of Avalere Health, a health-industry consultancy. “This is just an amped-up political environment.”

THE DAY AHEAD:

Personal-income and spending data from the Commerce Department is likely to show a 0.3% uptick in consumer spending in August—stronger than July’s 0.1% increase. But more progress is needed, writes Ahead of the Tape’s Spencer Jakab. That may be one reason the Fed thought twice about tapering bond purchases. Year to date, the annual gain in personal-consumption expenditures has averaged an anemic 3.1%—not much once inflation is taken into account. The annual average going back to 1960 has been 6.9%. The other side of the spending ledger, of course, is income, Jakab notes. That also is seen improving in August, but not by nearly as much as economic policy makers would like. Year to date, disposable personal income has risen at an annual pace of just 1.8% amid tax increases and tepid wage gains. The average since 1960 has been 6.9%.

Markets flash: Asia ended higher, but European shares are down on worries that the budget battle in Washington could lead to a government shutdown (more on that below). DJIA futures are also lower.

EXCLUSIVE ON CFOJ:

Rue21 stuck in surging debt markets. The debt markets may be wide open for companies, but in the case of rue21, investors are proving that they remain capable of skepticism, writes Vipal Monga. The clothing retailer is having trouble selling its loans, leaving the company’s underwriters facing steep losses, the WSJ reports. “There’s high default risk, that’s what investors think,” said one debt-capital-markets banker who’s not working on the transaction. The company’s struggle in the debt market doesn’t suggest broader issues with corporate financing—most companies are still able to find funding at attractive rates. But rue21’s situation is particularly precarious. The retailer, which sells clothes and accessories for teens, sold itself to private-equity firm Apax Partners for $1.1 billion in May, and has since suffered dramatic declines in sales. “There must be a fundamental issue with the company,” said one debt adviser who’s not involved with the transaction. “Everything else in the market is getting blown out.”

CORPORATE NEWS:

Penney to sell $1 billion in shares.J.C. Penney moved to raise as much as $1 billion by selling stock, boosting its cushion of cash ahead of the holiday season, the WSJ reports. Penney said yesterday afternoon it would sell up to 96.6 million shares in a public offering underwritten by Goldman Sachs. Its shares fell 4.5% to $9.95 in after-hours trading, following the announcement, after having risen 3% to $10.42 during the regular session. Penney is seeing some improvement in sales but is still facing concerns from creditors, who worry that the retailer’s road ahead is uncertain.

Oracle CFO bets on cloud to lift margins.OracleCFO Safra Catz says her company will boost operating margins by shifting to services delivered via the Web from software installed on computers, Bloomberg reports. Oracle will be more profitable as technology spending is directed toward cloud-computing tools, Ms. Catz, who is also co-president, told analysts in San Francisco. She said that Oracle is poised to gain market share amid shifts to mobile and Web-based services, regardless of the state of the economy. Analysts project on average that Oracle will reach an operating margin of 48% for the fiscal year through May, compared with 39% in the previous year.

Tech and telecoms lead M&A rebound.Verizon’s buyout of Vodafone’s stake in their U.S. wireless joint venture has helped to generate a year-to-year increase in global mergers and acquisitions and put dealmakers on track for their best year since 2008, the FT’s Anousha Sakoui writes. The value of announced M&A for the first nine months reached $1.57 trillion, up 4.6% from last year’s $1.5 trillion. It was only in early September that 2013’s deal haul overtook last year’s tally. Until recently companies haven’t been penalized for delaying big M&A moves. However, without a strong economic recovery in the U.S. and Europe, they’re expected to face pressure from investors to find sources of revenue growth. “Companies are realizing now they will have to start delivering on material growth for 2014,” said Chris Ventresca, global co-head of M&A at J.P. Morgan.

The man picking Microsoft’s next CEO. Microsoft director John Thompson heads the board committee charged with finding a successor to Steve Ballmer. The seasoned tech veteran will have to convince critics that he and fellow outside directors won’t rubber-stamp the views of Bill Gates, Microsoft’s legendary chairman, co-founder and biggest individual stockholder, write the WSJ’s Don Clark and Joann S. Lublin. “I have enormous respect for Bill,” Mr. Thompson said in an interview. “But I didn’t accept the role on the board or the role as the lead independent director to be Bill’s pawn.” Mr. Thompson also needs to rebuild the company’s frayed relationship with Wall Street, a feat that won’t be easy. Some analysts fault Microsoft directors for going along with many of Mr. Ballmer’s moves that hurt the share price, including a $7 billion deal to buy Nokia Corp.'s smartphone business.

Companies beach tax bills in Spanish shells. The FT’s Miles Johnson examines how companies are using a relatively unknown part of Spanish tax law to reduce their tax bills in the latest in a series on multinational tax avoidance. Companies including ExxonMobil, Hewlett-Packard, Pepsi, Eli Lilly, Anheuser-Busch InBev and Vodafone have structured subsidiaries as holding companies called ETVEs to avoid double taxation. In some cases, the vehicles are used as tax-efficient conduits to transfer profits from foreign subsidiaries to parent companies far away from Madrid. While some ETVEs are combined with large operations in Spain, others are shadow companies that operate for only a few years before being quietly shut down.

ECONOMY:

No clear path to avoid shutdown. Congress’s path to avoiding a government shutdown became even rougher, as Speaker John Boehner said the House wouldn’t accept the spending plan likely to emerge from the Senate, the WSJ reports. The Senate is expected to pass a bill today that would fund the government for the first 1½ months of the new fiscal year. But Senate Democrats plan to restore money for the Affordable Care Act that House Republicans had stripped out, leaving the two chambers in conflict.

REGULATION:

New swaps rules stoke fears. Banks, brokers and investors are warning of potential turmoil in a major part of the derivatives market on Oct. 2, when new U.S. rules kick in governing how swaps are traded, the WSJ reports. Under the new rules, most swaps must be transacted through registered venues, routed through central clearing houses and reported to data warehouses known as trade repositories. Industry officials are lobbying the CFTC to delay the rules, arguing that the new standards have been applied too quickly and could throw the market into disarray. Others complain that the time frame for trading platforms to comply with the rules, and for traders to test new systems, is so tight it could propel trading to lightly regulated jurisdictions and venues that aren’t subject to the rules.

SEC chairman vows tougher stance on fraud.SEC Chairman Mary Jo White says the agency will seek fraud charges against more individuals and pursue larger fines for corporate wrongdoing, the WSJ reports. “We need to be certain our settlements have teeth and send a strong message of deterrence,” Ms. White said in a speech before institutional investors. “That is why in each case I have encouraged our enforcement teams to think hard about whether the remedies they are seeking would sufficiently redress the wrongdoing and cause would-be future offenders to think twice.” Ms. White’s comments build on a June interview in which she said the agency in select cases would insist on admissions of guilt as a condition in settlements.

CFO MOVES:

Western Digital said Chief Financial Officer Wolfgang Nickl is resigning in November to return to his native Europe and become the CFO for ASML Holding NV, a Netherlands-based maker of semiconductor-production technology. Western Digital is conducting a search for his replacement. At ASML, Mr. Nickl will replace Peter Wennink, who was promoted to CEO earlier this year. For the year ended in late-June 2012, Mr. Nickl received compensation valued at nearly $3.2 million, including a salary of $393,846, stock and option awards valued at $1.7 million and a bonus of roughly $1 million, according to Western Digital’s most recent proxy statement.

Einstein Noah Restaurant Groupnamed John Coletta as its CFO, effective Oct. 21. He replaces Manny Hilario, who was promoted to chief operations officer in July. Mr. Coletta is currently CFO of Quiznos, a closely held sandwich chain based in Denver which he joined in September 2012. At Einstein Noah Restaurant Group he will receive a salary of $300,000, a prorated bonus for the rest of 2013 of at least $50,000 and a $50,000 signing bonus. He will also receive options to acquire 40,000 shares and a grant of 20,000 restricted stock units, according to a regulatory filing, and he will receive severance of a year’s pay if his employment is terminated for a reason other than cause within the first 12 months.

Meta Financial Group, a bank holding company, promoted Glen Herrick to CFO, treasurer and secretary from senior vice president of finance and investment management, effective Oct. 1. He succeeds Dave Leedom, who will remain with the company in a part-time position so he can “spend more time managing some recent health issues,” the company said in a news release. The move came as part of several executive promotions, which Chief Executive Tyler Haahr said in a statement reflect its growth into a larger and more complex business over the past few years. Compensation information wasn’t immediately disclosed. For the year ended in September 2012, Mr. Leedom received total compensation valued at $586,209, including $229,056 in salary, a stock award valued at $162,190 and a $125,175 bonus, according to its proxy.

THE WEEKEND READER

Every Friday we select a handful of in-depth articles we think are worth a bit of your valuable weekend time, either because they peel back the layers on a compelling business story, or somehow make us look at business in a different light.

Why philanthropy is good for business. During Doug Conant’s decade-long tenure as Campbell Soup CEO, the company launched philanthropic initiatives tied to childhood obesity and hunger in communities where Campbell operated major facilities. “I observed that the more we leveraged our business resources to deliver social value to the communities around us, the more engaged our employees became and the better we performed in the marketplace,” he writes in this commentary piece for McKinsey. Now serving as chairman of CECP, an organization that helps companies “achieve progress on societal challenges,” Mr. Conant makes the case for the business benefits of philanthropy. When Vodafone, in 2003, teamed with a Kenyan affiliate to bring mobile-banking to rural areas, the company not only provided a public good, it opened up a new business. IBM Corp. employees became involved in a program that put teams of experts into communities worldwide to solve local issues, where they achieved a level of professional development the company “could not have purchased through the market.”

Nate Silver on teaching yourself statistics.Harvard Business Review’s Walter Frick sits down with data science “poster child” Nate Silver to talk about what it takes for an ordinary executive to acquire statistical literacy. Mr. Silver, the brains behind the FiveThirtyEight political polling blog, which correctly predicted the winner of the 2008 presidential election in 49 of the 50 states, tells Frick that applied experience trumps academic experience. “I mean the thing that’s toughest to teach is the intuition for what are big questions to ask. That intellectual curiosity … where you see a data set and you have at least a first approach on how much signal there is.” Students of the statistical arts should prepare to make some dumb mistakes on the way. “But yes, people who are motivated on their own, I think, are always going to do better than people who are fed a diet of things,” Mr. Silver says.

Qatar’s World Cup ‘slaves.’ When the Fédération Internationale de Football Association awarded Qatar rights to host the 2022 FIFA World Cup, critics cried corruption. How could the tiny emirate host one of the world’s most popular sporting events? How could players compete in a place where summer temperatures hit 122 degrees Fahrenheit? And what’s up with that alcohol ban? But as the Guardian reports, the reality of the decision is much, much worse. Migrant workers, many working on a “huge World Cup infrastructure project,” are dying at a frightful rate—at least 44 just between early June and August. One group estimates that at the current rate, 4,000 migrant workers will die “before a ball is kicked.” The Guardian’s Pete Pattisson says poor working and living conditions, nonpayment of wages and confiscation of work papers by employers have left many migrants in a state of “modern-day slavery.” “The allegations suggest a chain of exploitation leading from poor Nepalese villages to Qatari leaders,” Pattisson continues. “The overall picture is of one of the richest nations exploiting one of the poorest to get ready for the world’s most popular sporting tournament.”

Deloitte's Financial Reporting Alert discusses certain key accounting and financial reporting considerations related to the current economic conditions in the eurozone and Puerto Rico, including a summary of financial reporting implications that would result from a country's decision to exit the eurozone and an outline of disclosures recommended by the SEC in 2012 about European sovereign debt.